ATC121203: Report of the Select Committee on Co-Operative Governance and Traditional Affairs on Consideration of the Termination Of Intervention in Okhahlamba Local Municipality– dated 20 November 2012

THE FOLLOWING REPORT REPLACES THE REPORT OF THE SELECT COMMITTEE ON
CO-OPERATIVE COVERNANCE AND TRADITIONAL AFFAIRS PUBLISHED IN ATC NO

THE FOLLOWING REPORT REPLACES THE REPORT OF THE SELECT
COMMITTEE ON CO-OPERATIVE COVERNANCE AND TRADITIONAL AFFAIRS PUBLISHED IN ATC
NO. 156, DATED 20 NOVEMBER 2012, PAGE 4771
REPORT OF THE SELECT COMMITTEE ON CO-OPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS
ON CONSIDERATION OF THE TERMINATION OF INTERVENTION IN
OKHAHLAMBA
LOCAL
MUNICIPALITY
DATED 20
NOVEMBER 2012

The Select Committee on Co-operative Governance and
Traditional Affairs, having considered the directives of the National Council
of Provinces (NCOP), to consider and report on the notices of termination of
intervention in
Okhahlamba
Local
Municipality
in
KwaZulu-Natal
Province
, reports as follows:

1.
Introduction and Background

1.1
On 24
November 2009, the Provincial Executive Council of KwaZulu-Natal Province
resolved to intervene at
Okhahlamba
Local
Municipality
in terms of
section 139(1
)(
b) of the Constitution as a result of
failures to fulfill various executive obligations. The MEC for Co-operative
Governance and Traditional Affairs (
Cogta
) was
authorized by the Provincial Executive to appoint Administrators at the
aforementioned municipalities. The Administrators were appointed to undertake
the functions in terms of section 51 of the Local Government: Municipal Systems
Act (Act 32 of 2000), to establish and organize the administration in a manner
that would enable the municipalities to achieve the objects of local government,
as set out in section 152 of the Constitution.

1.2
On
18 July 2012, the Executive Council resolved to terminate the intervention at
Okhahlamba
Local
Municipality
.
On 30 August 2012, the Office of the Chairperson of
NCOP referred the notices of termination of intervention
Okhahlamba
to the Select Committee on Co-operative Governance and Traditional Affairs for
consideration and reporting in terms of NCOP Rule 101.

2.
Reasons for Intervention in
Okhahlamba
Local
Municipality

2.1
The
main issues identified by the Provincial Executive to intervene in the affairs
of
Okhahlamba
Local
Municipality
related to the following matters:

·
The Municipality
did not have a functional management team which contributed to the Municipalitys
dysfunctional state.

·
The Auditor-Generals reports for the 2004/5, 2005/6,
2006/7 and the 2007/8 financial years, indicated that there were serious
deficiencies in the management systems and other accounting and financial
controls, and the Auditor-General issued disclaimed audit opinions in respect
of two financial years, and an adverse opinion in respect of the last year.

·
The annual
report for the 2007/8 financial year did not comply with section 121 of the Municipal
Finance Management Act (MFMA), as no performance report evaluating the
performance of the Municipality or Section 57 employees was attached.

·
The
Council did not table or submit an oversight report as required in terms of
section 129 of the MFMA. The Council did not have an established internal audit
unit and audit committee as required in terms of sections 165 and 166 of the
MFMA.

·
The Municipality
experienced serious financial problems, and this is evident from the poor cash
flow, and posted a deficit of R17 963 025.00 (un-audited) in the 2008/9
financial year. The accumulated deficit as at June 2009, totaled
R24 517 042.00. The grant funding allocated for Housing was utilized
irregularly to finance the operations of the Municipality. Unspent conditional
grants to the sum of R20 196 551.00 were not cashed backed.

·
As
reflected in the 2008/9 annual financial statements, general expenses increased
from R11 306 725.00 in the 2006/7 financial year, to
R57 294 633.00 in the 2008/9 financial year, resulting in a
percentage increase of 407%. The Municipality failed to make payments to its
creditors as and when it was due.

3.
Progress
of Intervention in
Okhahlamba
Local
Municipality

3.1
In terms of
progress achieved to date on the enhancement of revenue collection, the
verification
and assessment of the existing valuation roll and the compilation of the
supplementary valuation roll for 2011/12 was done and completed in April 2011,
with very few objections received, and were all subsequently resolved. For
continuous maintenance of the valuation roll, a service provider has been
retained by the Municipality and an advert for a service provider to assist
with the new process was already out, for the 2013/14 financial year
assessments.

3.2
The debt
book of over R18 million in the financial year 2010/11 was drastically reduced
to the extent of at least 50%. Equally, the collection rate had increased from
the 36% collection rate recorded during the financial 2010/ 2011 to 61
,44
% accumulatively, as at 30 April 2012 against the annual
target is 75%. The strict expenditure management measures resulted in the
Municipality having a total R81 million in cash reserves, including all
cash-backed conditional grants totaling just over R40 million. This simply
means that the Municipality was now able to accurately report on a monthly
basis on revenue, expenditure, cash flow, debt recovery and creditors.

3.3
All
Council statutory, administrative and functional structures have been
established and are all operational. Therein included
is
a fully functional audit committee and internal audit unit as well as IDP,
Budgeting and PMS procedures. Whilst the Municipality took a resolution binding
itself to the achievement of Clean Audit by 2013/14, it is highly likely that
all queries raised by the Auditor-General during the last financial year may be
resolved by this financial year, which may result in the Municipality obtaining
a clean audit in 2011/2012.

3.4
The
Municipality has compiled an Infrastructure Maintenance Plan which is being
implemented since June 2012, where all plant and equipment is sent to each ward
for a period of 10 days to ensure that all existing infrastructure is
maintained. The Municipality has also experienced difficulty in spending grants
relating to MIG-funded and Small-Town Development-funded projects during the
period of between October 2011 and March 2012, with the assistance from
Cogta
where a dedicated project manager was sourced. All of
these projects were now moving, and were fairly within the acceptable
expenditure levels. Furthermore, the electrification project funding which was
nearly lost due to non-expenditure and reporting, has now been re-secured with
the Implementing Agent already appointed.

3.5
It was reported that all
senior positions are filled, to the exception of a Director for Corporate
Services, and based on the investigations by the PWC, irregular payments have
been identified and criminal cases have been instituted. The main reason for
the extension of the intervention on 13 December 2011 was the fact that the Municipality
lacked a senior management team to sustain the progress and to implement any
outstanding intervention priorities and sustain progress made. However, based
on the fact that the senior positions were filled and that there was
considerable progress in respect of the intervention priorities, the
intervention was terminated on 13 December 2012.

4.
Committee Observations

4.1
The Committee is of the opinion that,
for the termination of intervention in
Okhahlamba
Local
Municipality
to be efficient and effective, there has to be a committed political and
administrative leadership with sound administrative and management processes in
place.